How transparency in health care can raise quality and lower costs

Transparency in health care means allowing consumers to have both cost and quality information for services delivered by health care service providers. In health care, this kind of information has been largely invisible and unknown to consumers, including employer groups. Many believe this lack of information is a factor in high health care costs.

In recent years, both health plans and employer groups have been supportive of the concept that directly engaging consumers in decision-making can help to reduce costs. And, in order to engage consumers, they must be informed about costs and quality of services.

“Transparency enables consumers to compare both the cost and the quality of health care treatments,” says Dr. Stephen Perkins, vice president of Medical Affairs for UPMC Health Plan. “Those two pieces of information are essential. That is the only way they can truly make informed choices among doctors and hospitals.”

Smart Business spoke with Perkins about transparency and its possible effects on health care and health care costs in the future.

Why is transparency important?

First, for providers, it benchmarks their performance, thereby giving them a way to measure their performance against others and, consequently, make improvements. For insurers, it provides a way to recognize and reward quality and efficiency in the delivery of health care. And, finally, it provides a way to help patients make more informed decisions about their care.

In addition, the cost of procedures can vary dramatically by facility, and often the consumer has no idea of the price differences. At present, health care may be the only industry in which consumers are expected to purchase a service without fully knowing the cost or quality of what they are getting. Most consumers who are part of an employer’s health plan have no idea about the cost drivers that determine the premiums they pay.

How can transparency affect health care costs?

At present, consumers are largely unaware of the price differences that exist for the same services from different providers. They have little idea about the cost of just about anything connected to health care, with the possible exception of co-payments. Consumers certainly have a right to know the quality and cost of their health care. Through health care transparency, consumers can get the information necessary to be able to make choices based on value. Reliable cost and quality information is essential to making choices. In theory, consumer choice should create incentives at all levels and motivate the health care system to provide better care for less money. When providers compare themselves to one another, this can begin a process that could lead to improvements in care and reductions in costs.

For almost all other purchases, consumers can readily get information about price and quality. This has always been presumed to be the basis for making intelligent choices that make sense economically. It would seem logical to assume that will be the case with health care as well.

Certainly, it makes sense that engaging individuals to be more responsible in managing their health and in purchasing health care services is a necessary first step to curbing costs in health care.

What about the differences between health care purchases and other purchases?

There are certainly differences. For one thing, consumers might be inclined to automatically associate cost with quality, when that may not necessarily be the case. In addition, it is not always possible for health care decisions to be made following a slow and deliberative process. These decisions are often made under emergency conditions and at times of high emotional stress.

What kind of consumer tools can be effective to ensure transparency?

In order for consumers to get information that is most useful, they would need to know data that is derived from actual claims. That way they see what actually was paid to the hospital for a certain procedure, for instance. They can use that information to determine, for example, what the cost of a certain procedure was in several different hospitals in the area. But consumers have to know not just how much a procedure costs but also the total cost of caring for a given condition.

How will health plans be involved in transparency efforts?

Health plans will be essential to transparency efforts because they have the capacity to make price and quality information available at the local level and they can offer consumer-directed plans for employers and individuals.

Health plans have the capacity to show comparisons of price, quality and efficiency. They are interested in transparency because providing quality and price information to consumers in a way they can easily access and use is also a way to build trust with members.

Why would providers support transparency?

Transparency data will allow providers to improve by benchmarking their performance against others. It encourages private insurers and public programs to reward quality and efficiency. And, it helps patients to make more informed choices about their care.

There will be concern, of course, that consumers might, at least initially, be confused by the new information, but essentially, transparency is seen as something that will certainly become a benefit to consumers.